Quarterly Macroeconomic Review - IV Q, 2017

With regard to the real sector, according to preliminary estimates, average growth of real GDP amounted to 4.7% in Q4 2017, 0.6 pp higher than the PBO forecast. Average economic growth in 2017 reached 4.8%, which equals the PBO forecast (December 2017). In the 4th quarter, average annual inflation totaled 6.7%, which exceeds the National Bank target (4%).

Concerning the fiscal sector, in Q4 2017, consolidated budget revenues increased by 9.2% YoY, while expenses and acquisition of non-financial assets increased by 11.4%. Significant hikes were observed in both capital (44%) and recurrent (5.8%) expenditures. As of Q4 2017, public debt in nominal terms increased by 12.6% YoY (debt-to-GDP ratio will be assessed after publication of 2017 GDP data).

As for the external sector dynamics, in Q4 2017, external trade of goods was 18% higher YoY, including a 31% increase in exports and a 14% increase in imports. A positive trend has emerged since Q4 2016 – the growth rate of exports remains high and, in the 4th quarter, exports reached one of the highest values compared to the respective period of previous years. Total international reserves also grew, by 10.3%. In the 4th quarter, the exchange rate of GEL (period average) against USD fell by 6.7% QoQ, and by 3.8% YoY.

In the matter of the monetary sector, in Q4 2017, market interest rates on loans declined slightly by 0.1 pp QoQ and reached 16.6%. In the 4th quarter, commercial bank loans increased YoY, while dollarization declined both in case of deposits and loans.

Out of social and labor market indicators, in Q3 2017, the number of business sector employees increased by 37,900 YoY and reached 643,900. In Q4 2017, expenditure on education increased by 13.6% YoY, and on healthcare – by 12.2%.